Faced with hyperinflation, a worthless local currency and a risky black market for dollars, Venezuelans are increasingly turning to bitcoin as a tool for survival in the world’s worst-performing economy.
Born in 2008 in response to the global banking and credit crisis, bitcoin has found its “patient zero” a decade later in Venezuela.
As Venezuelans seek to skirt capital controls and a crumbling financial system, it is not difficult to see the appeal of a decentralized digital currency that can function beyond banks and any central authority. The crypto trend in Venezuela is so strong that the government even tried to get in on the act, issuing, with little credibility, the “petro” coin as an alternative to the official currency.
Venezuela, home of the biggest oil reserves in the world and once a regional economic powerhouse, didn’t fall into crisis overnight. From my years reporting on Venezuela as Reuters' Caracas bureau chief, I vividly remember the day in 2007 when President Hugo Chávez chopped three zeros off currency bills. A 1,000-bolivar note became a single bolivar—and a sad symbol of the government’s hapless policies.
What were supposed to be temporary measures to avoid capital flight in a moment of political and financial turmoil became a hallmark of Chávez’s self-styled socialism. Manipulating the local currency in the face of market forces ended up eroding trust in the bolivar. And there lay the foundations of the economic catastrophe and humanitarian emergency that we see today.
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